Tuesday, 22 August 2017

Are you being overcharged? Fancy saving £332 per month?

When initially taking a mortgage, many homeowners choose to take a fixed rate or tracker rate that lasts for between 2-5 years.  When these rates end, in most cases the borrowing will transfer onto the lenders ‘Standard Variable Rate’ (SVR) and for most lenders, this means the rate charged will be between 3.74% to 5.74%.  
Dave Rees, our mortgage expert, reveals how you could save up to £332 per month on your mortgage.
Typically, the rate for Standard Variable Rates are higher than those that are available if taking a new mortgage, so for most people a significant saving can be made by shopping around for an alternative.  For example, a mortgage of £200,000 with 20 years remaining would cost £1,291pcm on a typical SVR of 4.74%.  However, assuming there was equity of at least 25%, a 2 year fixed rate could be obtained at 1.44% - this would cut monthly repayments to £959pcm(*).

Alternatively, a 5 year fixed rate could be obtained for 1.69% with a £749 fee that would cut payments to £982pcm (*)  A new lender will require the property value to be confirmed and a solicitor to be involved but the lenders offering these products (and many others) would pay these costs on behalf of the applicants.

Consideration should also be given to taking a new product with the current lender as in most cases, lenders will offer borrowers competitive options as an alternative to switching to the SVR and if no additional borrowing is required, this is usually a quick/simple process with little/no additional underwriting involved.

Ideally, these options should be considered 2-3 months before the current product ends, to help ensure if changing, that the new product can start as soon as the current product ends.  For advice and guidance on product options, please contact Dave Rees on 01225 775923 (Option 2) or 07932 469797 or email at dave@davereesmortgages.co.uk

(* Products quoted correct as of August 2017)

Thursday, 3 August 2017

Identifying and Managing Your Blind Spots


We have all had the experience where something or someone sneaks up on us. A car when we’re switching lanes or a person behind us at the store, hiding in plain view. These blind spots catch us off guard - even when they’re in plain view.

The same could be said when it comes to financial planning. Too often, the big mistakes we make are the ones that are hiding in our blind spots.

Want to avoid being caught off guard? Here’s how you can identify and manage your blind spots.

A Framework for Identifying Blind Spots 

In the 1950s, two psychologists developed a tool to help people like you and me understand ourselves and our relationships with others in a deeper way. The tool – a framework broken down into four quadrants – helps us identify known knowns, known unknowns, unknown knowns, and unknown unknowns. That’s a mouthful, but let’s look at some examples.

  • * Known-Knowns in financial planning are straightforward. Recognising the need to save for long-term goals, the importance of diversifying investments, and how insurance can help protect us in an emergency all fall squarely into this quadrant. You and everybody else knows these basic human truths. 

  • * Known-Unknowns are the things we have yet to learn, like what’s the best savings account for university, how to invest your money, or what amount and type of insurance cover makes the most sense given your situation. You may not know the answer to these yourself, but chances are somebody else does - a quick Google search should do the trick.

  • * Unknown-Knowns are a little trickier because they are different for everyone. Young professionals, for example, may not be aware of retirement savings options outside of an employer pension, or that there are ways to invest elsewhere. The difficulty with Unknown Knowns is that you often don’t know what is the question you should be asking. This is where a good financial adviser can help - by defining the right type of question for the situation at hand.

  • * Unknown-Unknowns are things we have no idea may be an issue with our finances. Taking on far too much risk under the guise of diversification, or not knowing the fees paid for advice or investment management can be unknown unknowns. A recent example highlights the point, a new client wanted to transfer their pension, but wasn’t aware that by doing so they would forfeit the plan’s protected tax-free cash. When we explained this, it turns out they wasn’t aware what protected tax-free cash was, and whether it was a good thing or not. The primary purpose of a real financial planner is to take a bright lamp and shine it on quadrant four, illuminating the risks and opportunities that were previously hidden.

The purpose of financial planning is to shift as much as possible out of that last quadrant, the unknown unknowns. Not everything has to be moved to quadrant one, mind you. But the potential for reaching positive outcomes is higher when blind spots are uncovered – and managed!

The Sacrifices of Going it Alone

In our work as financial advisers, we come across many do-it-yourself investors. Most DIY investors take this route to save money on fees, but in some cases, the DIY investor is totally unaware of his blind spot.

Facing an unexpected tax bill because you’ve shifted your portfolio can put a dent in your overall financial plan. Missing out on take advantage of tax reliefs and allowances don’t help either. These are expensive blind spots that remain unknown when you go it alone.

Penny wise and pound foolish.

Managing Blind Spots

Uncovering blind spots has a lot to do with having someone on your team who can challenge your thinking. We all base decisions on what we think we know, and sometimes, that doesn’t work in our favour. It is helpful to be open to different perspectives since that’s how blind spots become known!

As advisers, that’s what we aim to do. We challenge the way you’ve always done things, not to prove you wrong, but to identify blind spots that could be costing you.

It is easy to get emotionally attached to certain strategies or make emotionally-charged decisions when things get rocky. But taking action – or avoiding action – based on how you feel can seriously set you back. Managing blind spots like these can save you time and money, both now and in the future.

To help manage blind spots that are both known and unknown, financial planning is key. Understanding whether you have enough insurance, and if it’s the right type, checking investments and the fees you’re paying, and analysing how much is being saved toward specific goals are all part of the process.

Without uncovering and then managing these all-too-common blind spots, you’re left in the dark.

If you would likely benefit from an accountability partner to help you uncover these blind spots, get in touch with us today. Our down to earth approach makes the planning process simple and straightforward.

As an exclusive offer for friends, family, and colleagues of our valued clients, we provide a Second Opinion Service to help the ones you care about understand their financial situations better. We’re happy to offer our expert guidance in the areas of investment management and financial planning to those looking for a different, beneficial approach. If you know someone who would benefit from this second opinion service, feel free to pass this information on to them directly.


Monday, 31 July 2017

Welome Ellis!




Hello!

I’m Ellis and the newest, and 7th member of the Jones Hill team (apparently this makes Jones Hill one of Bradford on Avon’s largest employers!).

I’m sure I’m going to be speaking with many of you over the coming months, so I thought sharing a little bit about me first would be a great start.

I competed for Great Britain in swimming, which meant I got to travel across the world representing our Country.

In my spare time, I generally enjoy running, baking, sampling multiple gins (an ever-growing, extensive collection is essential), country pubs, and absolutely love dogs. 

My partner is a School Teacher, so we relocated from Norwich as part of his job.  In Norwich I worked as a retirement solutions specialist for a little firm called Aviva, so I’ve got a really good background in understanding how financial services providers work. 

When I realised my partner and I were going to be relocating I looked around for the best financial services employer I could find, and quickly found myself at Jones Hill – this is my third day!

My motto for life is: …. 'If you think you are beaten, you are. If you think you dare not, you don't. If you'd like to win, but think you can't, it is almost certain you won't. The person who wins, is the person who believes they can'……

At Jones Hill, I will be looking after and developing our systems and processes with the aim of continuously improving your experience and journey with us. If you have any thoughts or ideas, drop me a line.

I look forward to meeting you all soon,

Ellis

Thursday, 13 July 2017

How to Make Sure You Reach Your Destination



Embarking on a financial plan is like sailing around the world. The voyage won’t always go to plan and there’ll be rough seas, but those who are prepared, flexible, patient and well-advised greatly increase the odds of reaching their destinations.

A mistake many inexperienced sailors make is not having a plan at all. They embark without a clear sense of their destination. And once they do decide, they often find themselves lost at sea in the wrong boat with inadequate provisions.

Here’s how you can improve your odds of reaching your destination, no matter what happens.

Picking Your Destination

To be successful on your financial planning trip, you’ll first need to figure out where it is you’re headed. This could be a comfortable retirement, leaving a legacy for your loved ones, or simply building a strong foundation for the future. Advisers help you determine that destination by talking you through SMART goal.

It’s not enough to say you want to retire eventually – you need to have an understanding of what that means specifically for you and your family. SMART goals help you do just that.

A real adviser works with you to create a destination that follows the SMART path: specific, measurable, achievable, relevant, and trackable. That typically means cashflow planning based on your means and your unique needs and wants.

Finding the Best Route

Once you know where you’re headed, it’s a lot easier to figure out how to get there. But without an adviser, you might be confused as to the right route for you.

Working with a trustworthy adviser allows you to get a clear map to your destination based on your tolerance for risk, your timeframe for arrival, and the resources you have to get you there. Some may have a canoe while others have a yacht – those paths look different. While one isn’t necessarily better than the other, you wouldn’t want to sail the Atlantic in a canoe.

Not only does an adviser help you draw up the best map based on those details, but they will also create a plan B. Life has a way of throwing unexpected curve balls into the mix. But when you have a backup plan, you’re less likely to be thrown off course when those curveballs show up. Smart advisers consider the range of possibilities for your journey.

Navigating the Storms

Choppy waters are inevitable along your trip. A job loss, death or disability, or a downturn in the market could happen to anyone. When things don’t go as planned, people without advisers are more likely to give up on their trip. But those working with an experienced planner have a partner in navigating the ups and downs with ease.

On your trip, you may see destinations that look more appealing or faster to reach than your original destination. In most cases, those distractions lead you down a dangerous path that doesn’t meet your long-term needs or wants. Advisers lend a hand in keeping your eyes on the prize, no matter how strong the distractions may be.

Sailing the tides of financial planning is no easy task. But having a shipmate who is working just as hard to get you to your destination as you are is an invaluable resource on your trip. If you’re ready to start designing your journey with the help of an experienced, professional and down-to-earth adviser, get in touch with us today.

Thursday, 29 June 2017

The Fairest Way to Pay for Financial Advice



Most people do not give themselves the title of investment professional. You’re busy working and spending time with your family, so many happily put the task of managing wealth into the hands of a seasoned, friendly adviser.

Whilst this is a logical choice, perhaps not every professional adviser is worth the price a client pays.

That’s because it’s common to see a percentage-based fee model among investment advisers and financial planners.  By common, I mean this is the way that 95% of advisers charge!

My opinion is that fixed fees are actually the fairest way to pay for professional advice.

If you’re wondering why fixed fees are in your best interest, this articles breaks down the four key issues with percentage fees and how fixed fee provide a fairer option.

Problem 1: The Cost

On the surface, a 1% fee sounds tiny when the opportunity for growth on an investment is substantial.  Unfortunately, that tiny percentage takes a massive chunk out of the total return over time (that’s because the power of compounding works against you).

Let’s look at the numbers:

If you have £250,000 invested in a portfolio that grows at a consistent 7% over a 10 year period, the value of your account would be £445,220 after a decade.

But, if your adviser charges a 1% fee of your account value from day one (so, £2,500 in year 1), your account balance is £46,000 less!  The charge is 1%, plus 7% annual growth down the plughole over the 10 years.

In contrast, by choosing a fixed flat fee of £125 per month, you would save over £28,000 in fees alone!

So although it’s ‘just’ 1%, that constant drip, drip, drip soon becomes serious money, money that could be used for funding your retirement or other financial goals.



Overlooking a percentage fee is common, especially when a portfolio was set up years ago and hasn’t been touched much since. To avoid losing out on investment returns, be sure to spot check your investments and pensions to ensure there is no percentage coming off the top, or ask your adviser to switch to a flat fee model instead.

Problem 2: Conflict of Interest

A huge, but less noticeable problem than percentage fees eating away at returns is an adviser’s conflict of interest under this model.

Someone who is being paid by a percentage of your portfolio’s value over time, loses their income or fees when you take money out of your portfolio.

If there is a need to withdraw a portion of the account for a child’s education expenses, retirement, or another big purchase, you can understand why advisers may well be hesitant to act in the client’s best interest for fear of reducing their own revenue.

A flat fee takes away the potential for this conflict of interest altogether. The only income is from the client fee – no rebates or commissions – which means we’re always doing what’s best for you. That includes taking money out of a portfolio to help fund your goals.

Problem 3: Cross-Subsidy

The percentage fee also poses the unique problem of paying for cross-subsidy, which means that clients who have more money subsidise those who have less. An investor with a £1M portfolio pays 1%, or £10,000, in fees each year, while someone with £100,000 pays £1,000 for the year. That may not seem like a glaring issue, but in reality, if both clients receive the same level of service, it’s clearly cross-subsidy.

Paying a flat fee for advice means clients with more assets are not paying for someone else’s planning.

We understand how hard you have worked for your money, and it shouldn’t be used to subsidise the cost of advice given to others.

Problem 4: Contingent Charging

Charging a percentage fee on invested assets is a clear issue for clients who don’t have assets to invest. Without a portfolio to manage, most advisers can’t charge a fee and subsequently earn an income. This often means that other financial priorities, like paying down debt or saving in an emergency fund, may not be suggested, even if they are in the best interest of the client.

Warren Buffett once said, “Never ask a barber if you need a haircut”. That rings true with contingent charging investment managers and financial advisers, too!

Paying a flat fee each month means we provide guidance on all aspects of your financial planning needs, whether there are assets to invest or not.

The percentage fee model is the most common in the financial services, but at Jones Hill, we stand firm in our dedication to clients’ needs by going against the grain.

Our flat fee structure avoids the pitfalls that percentage fees are bound to create, and our relationship with you as a client is stronger for it.

If you’re ready to move away from the percentage based charging model and start receiving unbiased, impartial and expert advice, get in touch with us today.

As an exclusive offer for friends, family, and colleagues of our valued clients, we provide a second opinion service to help the ones you care about understand their financial situations better. We’re happy to offer our expert guidance in the areas of investment management and financial planning to those looking for a different, beneficial approach. If you know someone who would benefit from this second opinion service, feel free to pass this information on to them directly.

 

Why we do it

Everyone deserves to lead a rich and fulfilling life without the worry of running short of money.

 

 

News and views

News, views and our thoughts on what is happening in the world of finance.

 

 

Get in touch

For further information, please don’t hesitate to contact us. We usually repsond very quickly!